From microcredit to microcapitalism
An interview with Nobel Peace Prize winner, Muhammad Yunus.
(Fortune Magazine) -- Forget billion-dollar development projects. When Bangladeshi economist Muhammad Yunus surveyed a poor village in the mid-1970s and found that all the money borrowed totaled just $27, he set out to create a new kind of bank - one that would give small loans to the poorest persons, particularly women, without collateral. With just a few dollars, the poor would become entrepreneurs and pull themselves out of poverty, taking Bangladesh along with them.
Today the grandfather of microcredit presides over an improbably profitable banking enterprise that is far along in meeting those lofty goals. Fortune caught up with Yunus on his way to the Clinton Global Initiative, where he would talk about his Grameen Bank's $5.7 billion in loans, $31,000 in education scholarships and how his newest venture, Grameen Danone Foods, would help lift Bangladesh from poverty by 2015.
How is business?
We have 6.5 million borrowers now, 97 percent women, all in Bangladesh. Annually, we lend out about $800 million in loans averaging $130. All the money comes from deposits and internal resources, and 67 percent of deposits comes from the borrowers themselves. We don't borrow from the government or have funders or external lenders. Our policy is simple but different: Nobody should be left behind. We go house to house in an outreach to touch every single poor household.
And people actually pay you back?
Our repayment rate is 99 percent. That's the hallmark of Grameen Bank - the reason people take us seriously. We have no guarantee, no references, no legal instrument, and still it works. It defies all the conventional wisdom.
Not everybody is an entrepreneur.
What is entrepreneurship, after all? Bigness is not the issue. Poor people are the ones who take challenges every day. The guy who sells a hot dog on the street is as much an entrepreneur as anyone else. Getting his $50 loan to start could be as difficult as finding $50 million for someone else. All people are entrepreneurs. Some never discover their talent and direction.
So how do you measure your success? Obviously people are still poor in Bangladesh.
Every year we survey the poverty condition of Grameen families based on ten indicators: Do you have a solid roof? Do you have drinking water? Only if all ten questions are answered positively are you out of poverty. Fifty-eight percent of Grameen borrowers have already crossed the poverty line. Bangladesh has been reducing poverty on an average of 1 percent a year since 1990, and since 2000 by more than 2 percent a year. That puts us on track to achieve the Millennium Goals - reducing the number of poor people by half by 2015.
Speaking of entrepreneurship, Grameen is involved in more than banking now.
Yes, we created a company called Grameen Telecom to bring cell phones to rural areas. The country had half a million cell phones in 1997. Today Grameen has over nine million subscribers, and 250,000 borrowers of Grameen Bank have taken up cell phones as a business. They earn 17 percent of the total revenues of Grameen Telecom. But in Bangladesh, 70 percent of the people have no electricity. We solved that with solar power, another Grameen company. We have over 70,000 homes with solar panels already installed, and each month we add 2,000 homes. These are social businesses - not profit-maximizing enterprises.
Now you are moving from solar panels into yogurt?
Yes, Grameen Danone Foods will begin production Nov. 7 north of Dhaka. We will produce fortified yogurt, with vitamins, to address malnourishment. It will be called Shakti-da, which means "yogurt with strength." It will be made very cheap so that the poorest people can afford it, and it will be created in the village rather than the city. We want something local, that can be replicated, so that ownership doesn't run away to someone else. Zidane is coming for the opening - the whole country is buzzing.